Despite the BBC’s feeble attempt to negatively portray the Bank of England Governor’s remarks about a currency union between an Independent Scotland and the rest of the UK I believe the outcome of his speech in Edinburgh today was, on the contrary, very positive. I also find Alastair Darling’s tweets suggesting that Salmond’s boasts about the pound have been quashed totally unjustified and very typical of the No campaign.
Not to be sucked in by his George Clooney style of smoothness with which he delivered his cool performance this man was sent with a specific agenda to put a spanner in the works. For a non-politician he was more cunning and shrewd than the entire Westminster Cabinet put together.
I can’t help but visualise the cheers of hooray in honour of his performance that undoubtedly await his return to Threadneedle Street from his colleagues at the Treasury or a wink and nod from Cameron himself!
However, I believe this cleverly orchestrated manoeuvre (and you can be certain there shall be more to come in every shape and form) to attempt to sabotage the independence campaign has actually backfired on Westminster.
Regardless of his position on the question of independence there is only one thing that I can deduce from his speech which is quite clearly without a doubt a currency union between an Independent Scotland and the rest of the UK is entirely POSSIBLE AND WORKABLE.
A currency union makes sense for a new Scotland’s fresh economy as the trade of goods and services between it and the UK equates to many billions of pounds. A currency union would ensure that the flow of goods and services, the imports and exports, would be fully safeguarded. This has to be one of the most important reasons for a currency union, advantageous not only to Scotland but also equally beneficial for the rest of the UK.
From a European angle we as an independent nation require to demonstrate financial stability, a healthy currency and a decent GDP, ie a good economy, to receive full advantages of Euro membership. A currency union will help Scotland make its proper impact on Europe.
In the likely event of a Yes vote then the currency union in my opinion is the only suitable option for Scotland to ensure that come the 19th of September it will make the practical aspect of transition so smooth that not even a single business or its customer is affected or even a single penny is lost from the Scottish economy in the process.
The other options that are available to us are to keep the Sterling without the Bank of England. This option would not be suitable as it is designed for countries with low financial sectors; low debt and high reserves. Scotland enjoys a reasonable size of a financial sector whilst possessing the ability and ambition to expand this extremely valuable aspect of our economy. It is very likely then under independence this sector will grow considerably more. Currently therefore even if this option were to be exercised as a viable one it would be impossible to implement it in time resulting in jeopardising our trade and commerce with our partners.
Another option is for Scotland to have its own currency with its own equivalent of the Bank of England but this option would require considerable time to implement. This option too would affect very badly our trade and commerce connections. As a simple example there are millions of mortgage borrowers in Scotland who have loans from English lenders, any fluctuations in currency exchange rates would affect their monthly repayments constantly. Of course there are other numerous borrowers apart from mortgage borrowers who would also be affected. Equally there are customers of Scottish lenders and finance houses in the rest of the UK who would also encounter similar difficulties.
However, this last option is an option that Scotland may strive to adopt sometime in the future.
The overriding factor presently though is to protect our business and commerce and to ensure a smooth transition to becoming an independent nation.
The Governor made it very clear that his Bank has the ability, as a technocratic institution with delegated authority and responsibilities, to deliver on a currency union. He emphasised that the framework is there. It, the Bank of England, is duty-bound to implement whatever arrangements, as agreed by Holyrood and Westminster which would be put in place.
The Governor could not deny the mutual benefits to Scotland and the UK from sharing currency as this would actually promote investment by reducing uncertainty about currency movements and giving businesses access to deeper and more liquid financial markets.
Just as the right to decide on our country’s future is our right- a fact the government of the UK has had to accept, however reluctantly- and we are negotiating for ourselves the best of arrangements under our own terms then in equal measure and strong spirit I believe we are competent to also negotiate our terms on this very important issue too. This arrangement affects all of the states in the UK and carries with it mutual benefits for us all. Sharing the currency will also yield considerable financial benefits to the rest of the UK.
Scotland’s banking system size will grow sufficiently enough to host giants such as the Royal Bank and many others and even induce them to locate their headquarters in Scotland. Scotland has the potential to be a leading player on the international financial and banking scene. Don’t forget the Bank of Scotland, Royal Bank or the Clydesdale Bank were all Scottish giants, made in Scotland!
From the vast well of banking experience that exists in Scotland we are properly qualified to have our own Scottish regulatory financial body to police the industry to ensure the notorious banking crisis can never happen in an independent Scotland.
As Mr Carney says the terms of the Sterling union need to be “carefully negotiated”. He never said sterling union is impossible or too difficult to set up. These terms would from our perspective need to incorporate clear definitions on our exclusive right to determine the rates of interest and tax rates, exchange rates, revenue collection and expenditure without hindrance or dictate from the Bank of England or Westminster. Although he failed to give an exact answer to the question whether such arrangements will be in place within eighteen months after independence I believe he is aware only too well that they can actually be in place before then.
The fact we will enter into a currency union is almost a certainty but it does not mean we are ceding any part of our sovereignty. This agreement is a two way street, of equal advantage and benefit, they need it as much as we do, so it goes without saying that our team will ensure the terms are agreed on an equal, fair and transparent basis. It must reflect the spirit of purpose but more importantly it must be based on the ideology of independence without sacrificing any part of the hard struggle leading Scotland to its liberty.
In conclusion, I have deliberately left this to the end, the Governor never said whether his bank would or would not act as the lender of last resort to bail Scotland out if it encountered a banking crisis, mind you he never even suggested that Scotland would even face a banking crisis; this is all the hype travelling from London. He was asked this question by a reporter.
Although the question was unwarranted and carried no purpose other than for the usual scare monger that we have all come so use to now, the answer is quite simple. We will ensure these crisis never happen in the first place, we will ensure fat cats, greedy bonus grabbing bankers never create such a corrupt banking culture that they so happily gorged on in London or New York. Banks must be forced even more to control their “spread” and exercise even more caution on their policy of securitization. However, to avoid the Bank of England being the lender of last resort banks must be made to set up bigger contingency reserves only to be used by them in times of hardship or crisis. The members to the currency union can also pay into a common fund, like an insurance policy, to use when and if required only as the last resort to bail any bank from a financial crisis.
As far as our nation’s own Sovereign fund is concerned we find an excellent example in Norway where that small nation has used its oil revenues to save a staggering £450 Billion. As soon as we retain control of our oil we can look forward to using the £14 Billion it generates every year wisely and for the purpose of making Scotland a great country to live and work in.
You can follow Councillor Shabbar Jaffri on twitter @snpshab
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Shab Jaffri is also a media spokesperson for Scots Asians for Yes